© 2018 The Texas Lawbook.
By Claire Poole
(Jan. 30) – The last full week of January continued to chug along with deal activity for Texas lawyers, with 11 different law firms and 68 Texas lawyers working on 11 transactions worth $12.6 billion.
While the number of deals, firms and lawyers was down from the previous week, the value was up 34 percent, mostly due to a $7.2 billion conversion of incentive distribution rights to common stock by a midstream energy company.
Another energy-related initial public offering also moved forward, two joint ventures were inked, a bankruptcy was filed and oil and gas asset sales continued. In addition, there were fundings of a healthcare company and an oil and gas explorer as well as a private equity firm purchase of an oilfield services company, which begs the question: Has that segment of the industry really turned around? See below for details on the week’s deals.
Locke Lord, V&E aid on $7.2B Enbridge-Spectra IDR conversion
Energy-related master limited partnerships have been trying to simplify their corporate structures and eliminate incentive distribution rights so they can better compete for capital and projects. And Locke Lord has been happy to help.
The firm said Jan. 22 it advised the conflicts committee of Houston-based Spectra Energy Partners on the completed conversion of all of Enbridge’s incentive distribution rights and general partner economic interests into 172.5 million units worth $7.2 billion.
The team included partners Bill Swanstrom, Michael Blankenship and Jeff Wallace and associate Ben Smolij of Houston and partner Michelle Earley of Austin. Jefferies was the committee’s financial adviser.
Enbridge tapped Sullivan & Cromwell as its legal adviser and Vinson & Elkins partner Ryan Carney and associate Christine Mainguy in Houston as its tax advisers with assistance from the firm’s Washington, D.C. office. Barclays Capital served as Enbridge’s financial adviser.
Patrick Hester is Spectra Energy Partners’ vice president of law as well as vice president of gas transmission and midstream law at Spectra’s Canada-based parent, Enbridge. Hester was vice president and deputy general counsel at Spectra Energy Corp. before it merged with Enbridge last year.
Enbridge now holds a non-economic general partner interest in Spectra Energy Partners and owns about 403 million common units representing about 83 percent of its outstanding common units.
Locke Lord’s Blankenship said his law firm is seeing a growing trend in which master limited partnerships are starting to use these conversion transactions to improve competitiveness and growth potential.
Spectra Energy Partners chairman and president Bill Yardley said in a statement that with an improved cost of capital, the entity is better positioned to enhance and extend its distribution growth outlook through organic growth projects, potential future drop downs from Enbridge and third-party acquisitions.
JW, Bracewell assist on $2.5B FirstEnergy investment
Akron, Ohio-based utility giant FirstEnergy announced what it described as a transformational $2.5 billion equity investment on Jan. 22, and some Texas lawyers counseled some of the investors on the deal.
The investment includes $1.62 billion in mandatory convertible preferred equity and $850 million of common equity. The investors include affiliates of Elliott Management, Bluescape, GIC, and Zimmer Partners.
Jackson Walker partner Alex Frutos in Dallas represented New York-based Zimmer, which invested $850 million in the company’s common stock in a private placement of public equity, or PIPE, transaction.
Frutos told The Texas Lawbook that his firm does a fair amount of public work (it makes up a quarter of his practice) and that he’s known Zimmer general counsel Barbara Burger for over a year.
Bracewell assisted Bluescape, which invested in the $1.62 billion mandatory convertible preferred equity piece. That team included partners Will Anderson, Stephanie Koo Song and senior counsel Tara C. Ivascu and associate Benjamin J. Martin, all of Houston, along with attorneys from the firm’s New York and Connecticut offices.
Bracewell’s Anderson said the firm has counseled Bluescape on many matters, including its investment in Exco Resources in 2015.
Bluescape is led by John Wilder, the onetime CEO of Dallas utility TXU who sold it to KKR, TPG and Goldman Sachs in 2007 in what was the largest leverage buyout in history ($44 billion). The renamed Energy Future Holdings filed for bankruptcy seven years later.
Elliott Management used attorneys from Ropes & Gray in New York while GIC tapped Sidley Austin’s New York office. FirstEnergy enlisted Jones Day but no one from its Texas offices and Moelis served as its financial adviser.
The investment came as welcome news to FirstEnergy shareholders, who had seen their stock sink given its heavy debt load and money-losing power plants that it’s had trouble shedding. Its stock rose as much as 16 percent when the investment was announcement.
AKK advises initial purchasers in $2.2B Sunoco private placement
Andrews Kurth Kenyon said Jan. 23 it advised the initial purchasers in a $2.2 billion private placement by Sunoco and Sunoco Finance.
The placement included $1 billion in 4.875 percent senior notes due 2023, $800 million in 5.5 percent senior notes due 2026 and $400 million in 5.875 percent senior notes due 2028. The purchasers were led by Credit Suisse and RBC Capital Markets.
The AKK team in Houston included partners Jordan Hirsch, Henry Havre, Phil Haines, Rob Taylor, O’Banion Williams, Tom Ford, Allison Mantor, Tammy Brennig and Callie Parker and associates Jerry Chandapillai, Chris Adcock, Erin Juvenal, Leslie Slaughter, Brooke Milbauer, Madison Cox and Jocelyn Tau.
Jones Day counsels FTS International on proposed $250M IPO
Fort Worth hydraulic fracturing services provider FTS International said in a Securities and Exchange Commission filing Jan. 23 that it hoped to fetch $15 to $18 per share in its initial public offering of 15 million shares.
As the Lawbook reported Jan. 12, Jones Day partner Charles Haag in Dallas is advising FTS with help from the firm’s Chicago office. Shearman & Sterling out of New York is assisting the underwriters, who are led by Credit Suisse and Morgan Stanley.
FTS’ deputy general counsel is Jennifer Keefe, who practiced at Squire Patton Boggs for 17 years before joining the company in 2014. She’s an SMU Law graduate.
FTS, which is backed by Asian investment firms RRJ Capital and Temasek, has flirted with going public for years. It filed for the offering in February of last year and submitted amendments in October.
Latham, V&E advise on Hess infrastructure JV with Targa
Latham & Watkins said Jan. 26 it counseled Hess Midstream Partners on a recently inked joint venture with Targa Resources. The agreement was announced Jan. 25.
Partner Stephen Szalkowski was the lead, who received help from associates Chad Smith and Michael Sellner. Partner Tim Fenn and associate Bryant Lee provided tax advice, while partner Robert Frances provided real estate advice. All of the attorneys are in Houston.
Targa used V&E partner Chris Collins and associate Benji Barron in Houston.
Hess and Targa will own the venture 50/50. The project aims to build a new gas processing plant called Little Missouri Four located south of the Missouri River in McKenzie County, North Dakota. The plant will be able to handle 200 million standard cubic feet per day.
Targa will manage the construction and operate the plant. The parties expect to complete it in the fourth quarter.
Construction costs are expected to be $150 million. Hess also will invest $100 million for new pipeline infrastructure to gather volumes to the plant, giving it processing capacity of 350 million standard cubic feet per day with export options north and south of the Missouri River.
Akerman assists ETP on Philadelphia Energy bankruptcy
East Coast refiner Philadelphia Energy Solutions, a joint venture between the Carlyle Group and Energy Transfer Partners unit Sunoco, filed for Chapter 11 bankruptcy in Delaware this month, and at least one lawyer in Texas got a piece of it.
Akerman partner John Mitchell is advising ETP, which owned 32.52 percent of Philadelphia Energy Solutions’ parent. He has offices in Dallas and Houston.
ETP’s general counsel is Tom Mason, who was a partner at V&E and Andrews Kurth before joining the partnership in 2007. He’s a graduate of UT’s law school.
Non-Texas attorneys at Kirkland & Ellis and Pachulski Stang Ziehl & Jones are debtor’s counsel, while PJT Partners is the debtor’s financial adviser and Alvarez & Marsal is its restructuring adviser.
The prepackaged bankruptcy would involve a $260 million infusion of new capital into the company and help it cut interest payments and remove debt maturities for four years.
Term B lenders led by JP Morgan Chase are providing a $120 million debtor-in-possession loan. Sunoco and Carlyle are contributing $65 million for 25 percent of the reorganized company.
V&E counsels Gastar on Oklahoma asset sale for $107.5M
V&E said Jan. 26 it advised Houston-based Gastar Exploration on the sale of non-core reserves and acreage in Oklahoma to an unnamed buyer for $107.5 million. Gastar announced the deal Jan. 25 and expects to close it by Feb. 28.
The V&E corporate team was led by partner Mingda Zhao, who received assistance from senior associate Emery Choi and associate Ben Glass. Also advising were partners Jim Prince, Larry Nettles, Todd Way and Guy Gribov; counsel Grace Ho; senior associates Julia Pashin and Olivia Wang; and associate Andrew Schulte.
Tudor, Pickering, Holt was Gastar’s financial adviser.
The sale was of Gastar’s interest in the West Edmund Hunton Lime Unit, which produced 2,836 barrels of oil equivalent per day in the third quarter. Williams Capital analyst Gabriele Sorbara said the price exceeded his valuation estimate of $90 million to $100 million for the properties.
Gastar CEO J. Russell Porter said in a statement that the sale should provide the company with enough liquidity to fund its core Stack acreage development plan through this year, including drilling and completing 20 operated wells.
DLA Piper represents HNI Healthcare on $32M funding
Austin physician practice management company HNI Healthcare said Jan. 23 that it closed a $32.64 million Series E financing from a new investor, Los Angeles-and New York-based Bison Capital, as well as returning investor Spindletop Capital of Austin.
DLA Piper partner John Gilluly and associate Joseph Foré in Austin advised HNI Healthcare. Bison’s and Spindletop’s outside legal counsel couldn’t be ascertained by press time.
Founded by CEO Michael Gonzales, HNI plans to use the proceeds to evolve its technology VitalSigns while it expands geographically. Spindletop is led by founder Evan Melrose.
Willkie Farr counsels Lime Rock on Wayfinder commitment
Willkie Farr & Gallagher said Jan. 23 that it represented private equity firm Lime Rock Partners on its equity commitment to Wayfinder Resources.
Terms weren’t disclosed on the investment, which was announced Jan. 18.
The Willkie deal team was led by partners Bruce Herzog, who offices out of Houston and New York, and Michael De Voe Piazza in Houston.
Wayfinder is a Houston oil and gas company focused on the Scoop, Stack and Merge plays in Oklahoma, where it’s already leased a lot of properties.
The company is led by CEO Bryant Fulk, a former vice president at Wells Fargo and geologist at Chevron and Chesapeake Energy; COO Ivan Pinney, a former Chevron engineer; and CFO Will Derrick, who previously was an associate and senior exploration and production analyst at SunTrust Robinson Humphrey and research associate at Seaport Global Securities.
Jeffrey Scofield led the deal from Lime Rock out of Houston.
Baker Botts advises Intervale on PDC Logic purchase
Baker Botts confirmed Jan. 24 that it advised Intervale Capital on its purchase of a majority stake in drilling and completion bits maker PDC Logic for an undisclosed sum. Intervale announced the deal Jan. 16.
The attorneys included Houston partner Efren Acosta and associates Bill Pritchett and Kelton Miller on the corporate side; partner Andrew Thomison in Houston and associates Sarah Coleman in Austin and Josh Espinosa in Dallas on the finance side; partner Ron Scharnberg and associate Katie McEvilly in Houston on the tax side; and Kirstyn Kelley in Houston on the real estate side.
Wheeler, Morgan & Brown in Oklahoma City assisted PDC Logic. PNC Business Credit provided a working capital line and term loan to support the company’s expansion plans.
Tuan Tran led the deal from Intervale, which has raised $1.3 billion in committed capital since its 2006 inception. It’s investing from its third fund.
PDC, which is led by founder Tom Waitman and president Ronnie Thompson, is based in Norman, Okla. It has been in business since 2007 and has service locations in the Permian Basin, Mid-Continent, Eagle Ford and DJ Basin.
Locke Lord aids Matador Resources, San Mateo on Plains contract
Locke Lord worked on another deal this past week, announcing Jan. 25 it represented Matador Resources and affiliate San Mateo Midstream on long-term crude purchase and crude transportation contracts with affiliates of Plains All American Pipeline. The deal was announced Jan. 22.
Partner Jason Schumacher led the Locke Lord team with assistance from associates Henry Benton and Soden Abraham, all of Dallas; partner John Arnold and associate Max Stubbs, both in Austin; and partner Martin Gibson, also of Austin. They had assistance from an attorney in their Washington, D.C. office.
San Mateo and Plains set up a strategic relationship to gather and transport crude oil from Eddy County, New Mexico, to Midland and other end markets. They plan to file a joint tariff with the Federal Energy Regulatory Commission.
San Mateo is a joint venture between Matador Resources and Five Point Capital Partners, a Houston private equity fund.
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